On Our Radar

On Our Radar

Simon Property Group to Invest $1 Billion to Redevelop Mall Assets

Shopping mall landlord Simon Property Group plans to invest an additional $1 billion to redevelop its properties for the modern retail age.

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The Indianapolis-based real-estate investment trust, the largest shopping mall developer and owner in the world, has been renovating its malls and mixed-use assets across the U.S. It had spent $5 billion over the past five years on efforts such as interior enhancements, upgrades to tile, lights and furniture, and redeveloping former department store locations for other tenants.

"Our primary focus continues to be investments in our physical product to enhance our guests' experience," said David Simon, chairman and chief executive of Simon Property.

Shopping mall owners have been compelled to reinvest in their portfolios to bring in more restaurants and entertainment tenants and ensure they remain appealing as consumers' shopping preferences change. Owners with stronger balance sheets have more resources to improve their assets, which in turn helps attract retailers and shoppers.

Green Street Advisors, a real-estate research firm, conducts an annual review of 1,400 malls, outlets and other retail real estate that includes updates to estimates on their operating metrics as well as their grades.

Roughly 200 malls saw changes in grades, of which 85% went down the spectrum, not up, said Green Street Advisors. Apart from sales, the firm has given greater consideration to location, tenant mix and physical appeal this time.

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"Discussions with market participants suggest the criteria for mall quality has become more stringent, which coupled with a tumultuous retail environment, has caused us to become more rigid when grading malls," Green Street said.